AUSTRAC highlights ‘suspicious matter’ risks

The Australian financial planning industry has a “medium” level of risk of exposure to suspicious matters such as money laundering and terrorism funding, according to government body AUSTRAC.

There have been instances where these crime groups used financial planners to navigate the financial sector, the Australian Transaction Reports and Analysis Centre (AUSTRAC) has said in a new report.

However, despite the stated risk, the financial planning industry has been “significantly under-reporting” suspicious matters, the report concluded.

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“The true extent of criminal activity in the financial planning sector is likely to be greater than reporting levels indicate, as AUSTRAC assesses that there is significant under-reporting of suspicious matters by financial planners,” the report states.

“Over two years, AUSTRAC received 273 suspicious matters reports (SMRs) related to the financial planning sector, which is very low considering around 20 per cent of adult Australians seek financial advice from 25,000 financial planners across the country.”

AUSTRAC warned that there are consequences for advisers when these types of crimes emerge, including crime-related financial losses and reputational damage.

Brett Walker, a former investigator at the [ASIC precursor] ASC and principal of consultancy Smart Compliance, said AUSTRAC should reveal more information as to whether the referenced cases involved actual examples of money laundering or terrorism financing.

“Industry awareness of AUSTRAC is high and that is because no one can get much done without completing [Anti-Money Laundering and Counter-Terrorism Financing Act 2006] paperwork imposed by banks and other issuers of financial products,” Mr Walker told InvestorDaily.

“My assessment is that the typical SME AFSL has a high awareness of the requirements, but not a lot of cause to report much due to the inherent nature of their businesses.”

Mr Walker suggested that financial advice businesses are in reality very unlikely to accept clients at high risk of being involved in suspicious matters in the first place, such as those who wish to pay in cash or have an unstable immigration status.